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Article
Publication date: 6 September 2022

Godwin Musah, Daniel Domeher and Joseph Magnus Frimpong

The purpose of this paper is to investigate overconfidence bias and the effect of presidential elections on investor overconfidence bias in sub-Saharan African stock markets.

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Abstract

Purpose

The purpose of this paper is to investigate overconfidence bias and the effect of presidential elections on investor overconfidence bias in sub-Saharan African stock markets.

Design/methodology/approach

The study uses the vector autoregressive (VAR) model and its associated impulse response functions to investigate overconfidence bias. Furthermore, we make use of OLS regressions to examine the effect of presidential elections on investor overconfidence bias.

Findings

Investor overconfidence bias is present in the markets of Ghana and Tanzania suggesting that the phenomenon persists in sub–Saharan Africa's small markets. We also find that post-presidential election periods have a dampening effect on investor overconfidence in a country where there is less post-election uncertainty.

Originality/value

Despite the previous studies on investor overconfidence bias in sub-Saharan Africa, this paper to the best of the authors’ knowledge, is the first to investigate investor overconfidence bias in the context of presidential elections.

Details

African Journal of Economic and Management Studies, vol. 14 no. 1
Type: Research Article
ISSN: 2040-0705

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Article
Publication date: 2 August 2024

Tang Ting, Md Aslam Mia, Md Imran Hossain and Khaw Khai Wah

Given the growing emphasis among scholars, practitioners and policymakers on financial sustainability, this study aims to explore the applicability of machine learning techniques…

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Abstract

Purpose

Given the growing emphasis among scholars, practitioners and policymakers on financial sustainability, this study aims to explore the applicability of machine learning techniques in predicting the financial performance of microfinance institutions (MFIs).

Design/methodology/approach

This study gathered 9,059 firm-year observations spanning from 2003 to 2018 from the World Bank's Mix Market database. To predict the financial performance of MFIs, the authors applied a range of machine learning regression approaches to both training and testing data sets. These included linear regression, partial least squares, linear regression with stepwise selection, elastic net, random forest, quantile random forest, Bayesian ridge regression, K-Nearest Neighbors and support vector regression. All models were implemented using Python.

Findings

The findings revealed the random forest model as the most suitable choice, outperforming the other models considered. The effectiveness of the random forest model varied depending on specific scenarios, particularly the balance between training and testing data set proportions. More importantly, the results identified operational self-sufficiency as the most critical factor influencing the financial performance of MFIs.

Research limitations/implications

This study leveraged machine learning on a well-defined data set to identify the factors predicting the financial performance of MFIs. These insights offer valuable guidance for MFIs aiming to predict their long-term financial sustainability. Investors and donors can also use these findings to make informed decisions when selecting their potential recipients. Furthermore, practitioners and policymakers can use these findings to identify potential financial performance vulnerabilities.

Originality/value

This study stands out by using a global data set to investigate the best model for predicting the financial performance of MFIs, a relatively scarce subject in the existing microfinance literature. Moreover, it uses advanced machine learning techniques to gain a deeper understanding of the factors affecting the financial performance of MFIs.

Details

Journal of Modelling in Management, vol. 20 no. 2
Type: Research Article
ISSN: 1746-5664

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